What is a Deposit Unlock mortgage?

New Build Home Insurance

When you’re hoping to buy a new-build home but are struggling to save a deposit, Deposit Unlock can help you. With this scheme, you only need a 5% deposit and can benefit whether you’re a first-time buyer or an existing homeowner.

What is Deposit Unlock?

This innovative scheme is a collaboration between the Home Builders Federation (HBF) and Gallagher Re. HBF represents housing developers and this trade association realised that a mortgage guarantee scheme needed to be provided in the private sector to help more people buy new-build properties. The government’s Help to Buy scheme has been restricted to first-time buyers only and is also set to end on 31st March 2023. An alternative was needed in its place to boost the ownership of new builds. Deposit Unlock was created as a result. Gallagher Re is a reinsurance firm and has provided an insurance-backed solution to the need for low-deposit mortgages.

How does Deposit Unlock work?

Open to first-time buyers and existing homeowners, this low-deposit scheme allows you to buy a new-build home with just a 5% deposit. You can then secure a 95% mortgage via one of the lenders participating in the Deposit Unlock scheme. To persuade lenders to agree to this, the home builders provide insurance for the mortgages, lowering the risk for lenders.

Deposit Unlock is only available for the purchase of new builds via participating home builders. The maximum you can borrow is £750,000, depending on your lender’s terms.

Deposit Unlock scheme eligibility

To be eligible for the Deposit Unlock scheme, you need to meet these criteria:

  • You can be a first-time buyer or an existing homeowner.
  • The new build you buy must be for use as your own home.
  • You have to buy your new-build home via a participating home builder.
  • You need to pay a 5% deposit.
  • Your Deposit Unlock mortgage must be arranged via a participating lender.
  • You can borrow up to £750,000.

Each participating lender has their own eligibility criteria for your mortgage, taking your affordability and circumstances into account. They also offer different mortgage products for this scheme with competitive interest rates. Some Deposit Unlock lenders offer incentives too, such as a free valuation or no arrangement fee to pay.

Is Deposit Unlock right for you?

There are many benefits to buying a new build but there are two problems often faced by prospective buyers. One is not being able to save enough deposit and the other is finding it hard to secure a new build mortgage. New builds are often priced higher than similar older properties, which is known as the ‘new-build premium’. They can reduce in value within the first few years and this increases the risk for lenders.

Deposit Unlock gets around both of these issues. As the home builders pay to insure the mortgages, there is less risk for the lenders. This means they’re happier to offer 95% mortgages and, depending on their terms and your circumstances, this is for a loan amount of up to £750,000. Instead of having to find a large deposit of 15%, or 25% in some cases, you only need to save 5% to be able to buy a new build via the Deposit Unlock scheme.

Use Deposit Unlock to help buy your new-build home

Speak with our mortgage brokers on 01322 907 000 if you’re thinking about using Deposit Unlock to buy your home. Based in Kent, London and Edinburgh, they can advise you on this scheme and the alternatives available. They are skilled at arranging new build mortgages as well as standard residential mortgages if you decide to buy an older property instead of a new build. Having discussed your needs and circumstances, they will advise you on all of the options available. That way, you can make the right choice when buying your new home.